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The Pennsylvania Gaming Control Board has released revenue data for the first full month of table game operations at the state’s casinos. Recall that when table games play commenced in July, not all casinos started at the same time.
Thus August provides the first reliable indication of what table games are contributing to the revenue of the casinos. What is of most concern in Pittsburgh is whether table games are adding to the Rivers Casino income, which has been running well below expectations with just slot machines.
When the July data was released, local media were ready to pronounce table games a success. Indeed, the Rivers did earn more revenue from the new gambling avenue than any other casino in the state, but of course they were also the first to open and thus enjoyed a head start. Nine casinos began table games operations in July.
Table games are divided into two categories, banking and non-banking. Banking table games are played against the "house" such as black jack and roulette. In non-banking games, such as poker, participants play against each other with a percentage of the "pot" going to the house and the rest to the winning player. Two of the nine casinos in the state have chosen not to offer non-banking table games (Philadelphia’s Parx and Erie’s Presque Isle). Banking games offer a greater revenue opportunity for the casino than do non-banking games.
The August data show the Rivers had the third most gaming tables (85) of any casino and earned the fourth highest gross revenues ($4.2 million). In the non-banking category, the Rivers had the second highest gross revenue at nearly $713,000. However with the banking games, the Rivers had the fourth highest total with more than $3.4 million.
On a per table basis, the Rivers had the fourth highest total gross revenues per table in the state at nearly $49,000. They have the fifth highest gross revenue per table for the non-banking tables (out of seven casinos with non-banking games) and the third highest per table revenues from banking games. Clearly, Rivers is enjoying a relative advantage in the banking games.
The first full month of table games revenue seems to have provided middle of the road results for the total revenues and non-banking games with decent results for banking games. But what does this imply for the Rivers Casino’s overall operation? Does this additional $4.2 million in total table games revenues signal a reversal of fortune for the beleaguered slots parlor?
In their first year of operation, from August 2009 to August 2010, the Rivers Casino earned $222.3 million in gross terminal revenues from slots machines—an average of $4.3 million per week. Their management team originally projected the facility would earn $427.8 million or $8.2 million per week. Even the Gaming Board estimated the casino would earn $362 million, or nearly $7 million per week. The reality is that management’s projections were wildly overly optimistic. The question now: Do the revenues from table games lift the casino to its original earnings estimate?
While it is too early to see a well defined trend in table game gross revenues, the first full month’s revenue of $4.2 million breaks down to a weekly figure of just over $1 million. Adding this to the recent average weekly gross terminal revenue on slots machines still leaves the casino’s weekly revenue well below its original projections.
Keep in mind that table games are also much more labor intensive than slot machines. They require dealers, extra security (monitoring players at tables), supervisors, and back office employees to count and report revenues to the Gaming Control Board (slot machines are hardwired directly to Harrisburg and the reporting is done instantaneously while table game revenue requires a lot of effort). Each table game will require several employees to operate continuously over a 24/7 schedule. The Rivers’ 85 table games could require several hundred employees. Their salaries and benefits will consume a significant portion of the gross revenues. State gaming taxes and the local payout will consume 16 percent of gross.
And then there are capital costs for the games, marketing expenses and local payroll preparation taxes that will eat up more of the table game revenue. Suffice to say that the $1 million per week will net the casino much less than that. One good thing that can be said is that the table games have not hurt the slots play. Nor do they appear to have helped.
The first full month of table games may be cause for excitement as the casino increased its gross revenues by more than $4.2 million. However, this excitement needs to be tempered as those revenues still leave the casino well below pre-opening expectations.
While economic conditions are certainly not ideal for launching the Pittsburgh casino, it is important to note that the Philadelphia Parx casino is bringing in far more slots revenue and table games revenue (nearly $8 million per week for slot machines and $1.6 million per week for table games). So, the recession cannot be the sole explanation for the disappointing performance. More likely, the problem is that the estimates of market potential for the Pittsburgh area were too optimistic for two casinos in such close proximity.
Perhaps eventually the economy will boost the casino to something like the earnings level its owners hoped for. Unfortunately, forecasts for the economy are not looking too bright at the moment. And that is—or should be—the big concern for all businesses and governments.
FrankGamrat Ph.D., Sr. Research Assoc.Jake Haulk, Ph.D., President